A Different View of Venezuela’s Energy Problems

It would be easy to write a story about Venezuela’s energy problems and, in it, focus on the corruption and mismanagement that have taken place. This would make it look like Venezuela’s problems were different from everyone else’s. Taking this approach, it would be easy to argue that the problems wouldn’t have happened, if better leaders had been elected and if those leaders had chosen better policies.

I think that there is far more behind Venezuela’s financial and energy problems than corruption and mismanagement.

As I see the story, Venezuela realized that it had huge oil resources relative to its population, back as early as the 1920s. While these oil resources are substantial, the country misestimated how high a standard of living that these resources could support. To try to work around the issue of setting development goals too high, the country chose the path of distributing the benefits of oil exports in an almost socialistic manner. This socialistic approach, plus increased debt, hid the problem of a standard of living that could not really be supported for many years. Recent problems in Venezuela show that these approaches cannot be permanent solutions. In fact, it seems likely that Venezuela will be one of the first oil-exporting nations to collapse.

How the Subsidy from High-Priced Exported Oil Works 

Oil is a strange resource. The cost of oil production tends to be quite low, especially for oil exporters. The selling price is based on a world oil price that changes from day to day, depending on what some would call “demand.” The difference between the selling price and the cost of extraction can make oil exporters rich. In a sense, this difference might be considered an “energy surplus” that is being distributed to the economies of oil exporters. The greater the energy surplus being distributed, the greater the quantity of goods and services (made with energy products) that can be purchased from outside the country with the hard currency that is made available through the sale of oil.

In fact, the existence of such a profitable resource tends to crowd out development of other, less profitable, enterprises. Thus, Venezuela has tended to be a country whose economy revolves around oil. There is a small amount of agriculture and quite a bit of services, but for the most part, the goods used by the economy must be purchased from outside the country. Furthermore, nearly all of the revenue that is available to purchase these goods comes from the sale of oil exports. Thus, the economy tends to follow the fortune of oil sales.

Figure 1 shows a rough estimate of the benefit that Venezuela’s oil exports have provided in inflation-adjusted US dollars. Based on this approach, the per capita benefit from oil exports seems to have peaked very early, in about 1981.

Figure 1. Venezuela per capita value of oil exports, calculated by multiplying Venezuela’s year-by-year quantity of oil exports by the price in 2017$ of oil, and dividing by estimated population. Both price and quantity determined using BP 2018 Statistical Review of World Energy. Population based on 2017 United Nations middle estimates.

The people of Venezuela did not realize that the amount of benefit that oil exports would provide would start falling very early. Instead, leaders set their sights on living standards that would be affordable if the level of subsidy that the economy could obtain from oil exports were to remain as high as during the 1973 to 1981 period.

Figure 2 shows how much energy the population, on average, consumed over the 1965 to 2017 period. This figure shows that energy consumption per capita rose dramatically between 1973 and 1981. In this way, citizens were able to benefit from the huge rise in per capita oil export revenue, shown in Figure 1.

Figure 2. Energy consumption per capita for Venezuela, based on BP 2018 Statistical Review of World Energy data.

This higher level of energy consumption meant that the economy readjusted in a way that added more goods and services using energy. For example, the economy added paved roads, airports, schools, electricity generating capacity and healthcare. People came to expect this higher standard of living going forward, even if the level of subsidy that oil exports had been adding was rapidly disappearing.

The way the amounts in Figure 1 “work” is that they depend both on the quantity of oil exported and the market price for that oil. If Venezuela’s oil exports are not rising quickly enough, or if the price of oil is not high enough, the level of oil subsidy fails to rise enough to support the economy. Also, rising population becomes an issue because as population rises, more homes, cars, electricity, streets, and other goods (requiring energy consumption) are needed. Because Venezuela must import practically everything other than oil, it must either (a) export an increasing quantity of oil per year, or (b) get an increasingly high price for the oil it exports, if it wishes to support its rising population at its chosen standard of living.

It became evident very early that Venezuela had set its sights on a living standard that was far higher than it could really support. In the period since 1965, Venezuela’s first debt crisis took place in 1982, as the subsidy suddenly started falling. Later debt crises occurred in 1990, 1995, 1996, 1997, 1998, 2004, and 2017. Clearly, as soon as the per capita subsidy started falling in 1982 (see Figure 1), Venezuela’s economy became very troubled. It could not really support its chosen standard of living.

How could Venezuela hide the problem of an unsupportable living standard for over 35 years?

I see three major ways the insupportable living standard could be hidden:

(a) Pushing the problem off into the future using added debt

Nearly everyone is willing to believe that oil prices will rise as high as is needed to extract oil resources that seem to be available with current technology. Would-be lenders are also willing to believe that oil resources can be extracted as rapidly as needed to support the economy. Given this combination of beliefs, Venezuela has had little difficulty adding more debt, even in periods not long after it has been forced to restructure previous debt.

Recently, the biggest lender to Venezuela has been China. With this arrangement, Venezuela has been able to obtain the economic benefit of part of its oil resources, before the oil has actually been extracted. Unfortunately, this arrangement makes Venezuela more quickly susceptible to the adverse impact of a downturn in oil prices. To make matters worse, the debt to China appears to include a provision that creates a lower repayment level (in oil) if prices rise, but creates a higher repayment level (in oil) if oil prices fall. This provision no doubt looked favorable to Venezuela, back in the time period when it was believed that oil prices could only rise.

As far as I know, Venezuela is the only oil exporting country that has used debt as extensively as it has. Some oil exporters, such as Saudi Arabia, have taken the opposite approach, setting aside reserve funds to use in the event that oil prices fall. Needless to say, Venezuela’s use of debt has tended to make its economy very vulnerable to restructuring or defaults if oil prices fall.

(b) Pursuing economic simplification 

A complex economy is one that is set up, as much as possible, to keep up with growing technology. A significant share of expenditures go both toward making new capital goods and maintaining existing capital goods. There are considerable differences in pay levels, to make certain that those who are providing technical expertise are adequately compensated for their efforts. Business leaders also are adequately compensated for their contributions.

A much simpler economy, which is what most of the Venezuelan leaders have been aiming for, is an economy in which everyone gets a basic level of housing, transportation, and healthcare, but virtually no one gets very much. There is also not much investment in new technology and new capital goods because nearly all of the hard currency being obtained by selling oil exports is being used to purchase imported goods and services to support the basic level of goods and services (such as roads, electricity, education, and food) being provided to the many citizens of the economy. Since the external value of oil exports sets an upper limit on the quantity of goods and services that Venezuela can import, this leaves virtually no capacity to purchase imported goods and services needed to support new capital investment and research.

In Venezuela’s economy, the cost of both oil and electricity have been kept very low–below the cost of production. This helps keep citizens happy, but it also cuts off funds for new investment in these areas. This, too, is part of the simple economy approach.

One disadvantage of a simple economy is that the low wages for engineers and other professionals encourage these professionals to move to other countries, where compensation is more adequate. Another disadvantage of a simple economy is that it encourages bribery, because graft is a way of adjusting the system so that those who “can make things happen” are adequately compensated for their efforts. The simple economy approach also tends to discourage research and investment in new areas, such as natural gas production and improved methods of heavy oil extraction.

A simple economy can be kept operating for a while, but it quickly reaches limits in many ways:

  • The limited skill level of residents who have not emigrated for higher wages elsewhere makes the completion of complex projects, such as new electricity generation facilities, difficult.
  • The inadequate level of oil export revenue puts a limit on the amount of spare parts and other goods needed to maintain the infrastructure, such as electricity transmission.
  • As existing oil wells deplete, little funding (in hard currency needed for imports) is available to make investments in new wells for extraction.
  • Research on new techniques for oil extraction is also inhibited.

(c) Neglect of current systems becomes an increasing issue, as the lack of hard currency revenue from oil exports becomes a bigger issue. 

Venezuela can, in theory, buy what it needs from abroad, but there is a limit to the total amount of goods and services that can be imported, based on the amount of hard currency funds it obtains from selling crude oil. If the price of oil falls, then Venezuela must, in some way, cut back on goods and services that it had previously supplied. One of the least obvious way of doing this is by cutting back on maintenance and repairs.

The recent long electricity outage in Venezuela seems to be at least partially related to neglect of usual maintenance activities. It seems that Venezuela’s state-owned electrical company failed to keep the brush cleared under electric transmission lines leading away from the very major Guri Dam. It now appears that one of the causes of Venezuela’s recent long electricity outage was damage to transmission lines caused by a brush fire within the Guri complex. This could perhaps have been prevented by better maintenance.

Figure 2 shows that energy consumption per capita has been falling, especially since 2011. This would suggest that standards of living have been falling. Needless to say, if Venezuela’s oil exports drop further, a further reduction in standard of living can be expected.

Why Is America Issuing Sanctions Against Venezuela’s Oil Company PDVSA?

On January 28, 2019, the United States imposed sanctions against Venezuela’s state oil company, PDVSA. The reasons given for these sanctions are the following:

  • To hold accountable those responsible for Venezuela’s tragic decline in oil supply
  • To restore democracy
  • To help prevent further diverting of Venezuela’s assets by Maduro, and thereby preserve those assets for the people of Venezuela

These reasons sound good, but I expect that the primary real reason for the sanctions was to try to take Venezuela’s oil production offline and, through this action, force oil prices higher.

World oil prices have been far too low for oil producers since at least 2014.

Figure 3. Historical inflation-adjusted oil prices, based on inflation adjusted Brent-equivalent oil prices shown in BP 2018 Statistical Review of World Energy.

Many people, thinking about the oil price situation from the consumers’ point of view, are completely unaware of the problem that low oil prices can cause for producers. Oil producers may not go out of business immediately because of low oil prices, but eventually the low prices will cause a cutback in investment, and thus production. Countries that have sold some of their oil production in advance, such as Venezuela, are especially vulnerable.

Figure 4. Venezuela’s energy production by type, based on data of BP 2018 Statistical Review of World Energy.

Figure 4 shows that oil production for Venezuela has been dropping for a very long time. Its highest year of production was 1970, the same early high year as for the United States’ oil extraction. Natural gas is mostly “associated” gas, which is made available through oil production. Hydroelectric is small in comparison to oil and gas. Hydroelectric production has been generally falling since 2008.

There is a widespread belief among oil executives and politicians that reducing oil production will force oil prices up. I expect to see, at most, a brief spike in oil prices. The major issue is that the world economy is a networked system. Prices for oil and for electricity cannot rise higher than consumers, in the aggregate, can afford. If there is too much wage disparity around the world, the low wages of many workers will tend to hold oil prices down, because these workers cannot afford goods such as smartphones and automobiles made with oil and other energy products. These lower oil prices reflect the fact that the economy has been changing in ways that leave less surplus energy to distribute to oil exporters to operate their economies.

The way the networked economy works is determined by the laws of physics, whether we like it or not. As far as I can see, the end of oil extraction comes because oil prices cannot be raised high enough to make extraction profitable. Once oil extraction becomes unprofitable, oil exporting nations will start collapsing. Venezuela is the “canary in the coal mine” in this collapse process, because of the extensive use it has made of debt.

What If Oil Prices Can Be Forced Upward? 

If somehow oil prices could be forced up by reducing Venezuela’s exports to practically zero, this would have a double benefit:

  1. More oil from around the world, including the United States, could be profitably extracted, because oil resources that are more expensive to produce would suddenly become profitable.
  2. Venezuela’s oil could be more profitably extracted.

If prices actually rise, and if the United States remains in control of the situation, the US could theoretically expand Venezuela’s oil production. Venezuela has the largest oil reserves of any country in the world. Its expected cost of production is relatively low, if the exports of oil are not expected to support essentially the whole economy. The cost of pulling the oil out of the ground in Venezuela seems to be about $28 per barrel, if we believe a 2016 estimate by Rystad Energy.

Figure 5. Cost of producing a barrel of oil and gas in 2016. WSJ figure based on Rystead Energy analysis.

The cost of supporting the entire economy with the revenue from oil exports is far higher. Figure 6 shows that back in 2013-2014, the cost of oil, including the subsidies needed to maintain the operation of the rest of the economy, amounted to about $110 per barrel. I would expect that with all of Venezuela’s debt, the real cost might be even higher than this.

Figure 6. Estimate of OPEC break-even oil prices, including tax requirements by parent countries, from Arab Petroleum Investments Corporation.

If the US doesn’t plan to support all of Venezuela’s population with the export revenues from oil extraction, it can theoretically extract the oil more economically than the $110 per barrel price that is needed to support the whole economy. Thus, it could get along with a price closer to $28 per barrel.

Furthermore, the investment capabilities and technical expertise of the United States could, at least in theory, ramp up Venezuela’s oil production, if this is desired at some future date. Similarly, “non-associated” natural gas production could be ramped up, if desired, because this seems to be available, but has been neglected.

I expect that all of this development would be more difficult and expensive than a simple comparison such as this seems to suggest. The ultimate problem is that a whole economy needs to be in place to make the extraction possible. Even if a cursory examination suggests that substantial savings are possible, the cost associated with maintaining necessary support services would make the total cost of energy extraction much higher.

Conclusion

Venezuela seems to be the canary in the coal mine with respect to where oil exporters are headed. Other countries will want to push them out of oil production, so as to try to raise prices for themselves. Debt defaults and lack of availability of debt may also become issues.

One item of interest is the fact that in Venezuela, lack of oil revenues can adversely affect electricity supply. Thus, we should not be surprised if electricity supply fails at about the same time that oil production falls. Even electricity supply provided by hydroelectric plants seems to be at risk.

Another item of interest is how Venezuela’s attempt at even distribution of goods and services, using a somewhat socialistic approach, is working out. This approach (which is now being advocated by some political candidates) seems to have some short-term benefits, because it tends to keep the population happy–almost everyone seems to have a minimum standard of living. But, over the long term, this approach leads to the loss of the ability to maintain today’s high-tech economy. This approach doesn’t prevent collapse either, because a lack of investment and expertise eventually causes important parts of the system to stop operating.

 

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,454 Responses to A Different View of Venezuela’s Energy Problems

  1. SuperTramp says:

    It must be NICE….Yes, it is NICE….
    WASHINGTON (Reuters) – The Federal Reserve will remain the top holder of U.S. Treasuries for the foreseeable future after the central bank said it would stop shrinking its $4 trillion (£3.02 trillion) balance sheet by the end of September.
    So just what is inside this vast holding of assets?
    Before the financial crisis struck in late 2007, the Fed’s balance sheet was less than a quarter of its current size and consisted almost entirely of Treasury securities.
    Then, to help foster an economic recovery, the Fed went on a buying binge that ran from the end of 2008 to late 2014 in three phases, a programme known as quantitative easing (QE). It bought a mix of Treasuries and mortgage-backed securities (MBS) and over those six years its balance sheet mushroomed nearly five-fold.
    Today, Treasuries account for just 55 percent of the assets on the Fed’s balance sheet. The other big chunk is MBS at about 40 percent. The remainder is a hodge-podge of other assets, including gold.
    The Fed would like to get back to a balance sheet consisting mostly of Treasuries.
    https://finance.yahoo.com/news/inside-feds-balance-sheet-four-000244089.html
    Some comments…
    $3T stimulus over an 8 year period (’09-’16) accounts for pretty much 100% of any GDP growth reported during that same period. This will not end well
    The Federal Reserve will remain the top holder of U.S. Treasuries for the foreseeable future…………Nope, the FED does not intervene and manipulate markets, nope, not at all—-right
    The Fed can’t balance any thing
    Just like the trillion dollar annual budget deficit… Our grand kids will curse all of us for allowing this to happen. Our annual interest expense is currently $500B. Soon it will be $1T. Just think what we could do with that money. Rebuild our infrastructure. Improve our military. Shore up Social Security. It’s bad enough to run a massive deficit during a major recession. It’s completely unforgivable to do it when the economy is strong
    And finally
    They don’t even have to print it anymore. Just punch in a number in a computer screen and a zero or 2 or 3 or 10
    See YA!

    • The overall US debt is ~$70T and that’s even without some of the under rag unknown unknowns (for us).. Is it beyond systemic stability threshold? Well yes and no. Firstly, it’s large part of the overall substrate for global economy, so no fool from competing factions is going to put it in jeopardy, powerful and stake-holding elites new or of recent pedigree simply want to ride that wild tiger till the last nanosecond possible..

    • Lastcall says:

      ‘Improve our military…’ huh, with MOAR money?
      How so grasshopper; you spend more than the next 10 countries combined (?) …are there more countries that need droning?

    • Isn’t there a problem though, if the US unloads the Mortgage-Backed Securities? This is likely to raise interest rates on mortgages, isn’t it?

      It is my understanding that he US government’s mortgage plans are what allow most of the mortgages for all except the very wealthy. Cutting off the funding for this (or raising rates) would to be a major blow to the housing industry.

  2. Pingback: A Different View of Venezuela’s Energy Problems – Olduvai.ca

  3. Jeff W. says:

    Probably the US has multiple reasons for what they’re doing with respect to Venezuela. While short-term oil price increases are no doubt a plus to domestic shale operators, LTO also needs to be blended with heavier oils; Venezuela’s oil is a suitable source option. Then there is the rabid fear of SOCIALISM! that seems to weigh heavily on the US elites. Cuba has no oil yet we’re 50+ years into trying to starve it off the map. And there is the long history of CIA operations in the southern hemisphere, though mostly those were driven by desire for easier access to resources, agricultural and/or minerals.

    The US better hope that they hold onto the dollar staying to reserve currency; things may well go sideways if it doesn’t.

  4. Phil D says:

    Gail,

    I work in the oil business. At one point a few years ago I worked for a company that was a very large importer of Venezuelan crude into the US. My wife is Venezuelan, her family lives there, and I’ve traveled there a few times. I think I can add value to this discussion.

    There are some hits and some misses in this piece. You’re trying to fit Venezuela’s collapse into the Finite Resources framework, which has some relevance in the long scheme of things, but the immediate cause of the collapse is socialism. They call it Bolivarian Socalism over there, and it most closely resembles Cuban socialism, updated and repackaged with new marketing and social justice themes for the 21st century.

    Among some of the rank stupidities I saw with my own eyes while on trips there between 2012 – 2016:
    – government building and handing out fully furnished 2 and 3 bedroom homes for the favela-dwellers, for free, by the tens of thousands. Within a couple of years these neighborhoods already started to look like the favelas the residents had previously inhabited.
    – government passing a law in 2014 IIRC that banned companies from firing employees without government permission, which they never got. The result: businesses that are de facto not running, but where employees show up, collect a paycheck, turn on/off the lights, while the business owner bleeds out all capital until going bankrupt.
    – the price controls….oh, the price controls! They fix a price for everything down there. There is a department in the Ministry of Popular Power for the Economy called the “Department for Fair and Just Prices” (I’m not making this up). They fix prices for consumer goods based on a social justice agenda, so that even the poor can afford to eat well, because anything else would be unjust, right? The result is, for example, chicken meat that sells for less than the cost of production, so all the chicken producers/importers go out of business and now no one has any chicken to eat any more.
    – shopping in grocery stores where 3/4 of the shelves are empty and you have to visit 3 stores to find a few hot dogs for a birthday party.
    – regular blackouts
    – …and many more.

    Venezuela is an oil-exporting petrostate. The last decade saw the highest continual oil prices in history. Venezuela should be swimming in money. So many other major exporters – Norway, UAE, Russia, Saudi – have set up huge investment funds with their export earnings from the past decade. Venezuela is dead broke. You even point out this massive difference in outcomes in your article, but then don’t follow through and recognize the one major variable that’s very different in Venezuela: the government and its Marxist economic agenda. The government is hostile to business and capital (remember the expropriations and nationalizations of oil companies, banks, mining companies, etc. there in the early 2000s?)

    The US policy towards the country has nothing to do with its collapse. US sanctions didn’t start until 2015 and even then were against only a few individuals to begin with. Collapse was well underway then already. I don’t think the goal is to cause an oil shortage to raise prices. Trump has been very vocal about lowering oil prices for the good of the consumer economy and has tried to push the Saudis to compensate for what Venezuela is losing. I think the US is finally getting involved because Venezuela’s collapse is causing problems for neighbors in the region like Colombia, who are US allies, what with several million people leaving Venezuela in the past few years. The Venezuelan military and air force have also becomes involved in drug trafficking as a side business to pad their coffers. It’s not good policy to have chaos in your back yard.

    FWIW, Guaido is the representative of the only governing body elected by the people in Venezuela – the National Assembly. The Presidency has become a dictatorship, surviving on rigged elections, the court system is stacked with Socialist loyalists, ditto for the new legislature that Maduro created (unconstitutionally) to replace the National Assembly after they started blocking his agenda.

    All that being said, I agree with you that Venezuela had some long-standing structural issues shared by many other countries. Too many people, too little output. The country had 6 million people in 1960 with pretty good oil prices and exports over 2 million bpd. The fertility rate at the time was around 6 children per woman. Around 2010 or so the country had just under 30 million (lower now because of emigration), but was exporting a similar amount of crude oil. Think about that for a second – in 50 years, just 2 generations, they multiplied themselves 5 fold! It wouldn’t surprise me if fertility is below 2 now. That kind of mismatch between growth in mouths to feed and growth in available energy to consume is being seen in many countries today and it will hit a wall at some point. The difference in Venezuela is that the incompetence of the gov’t made it hit the wall right now in a catastrophic manner, rather than 30, 40 or 50 years in the future in a managed manner.

    • Phil,

      Thanks for your fine comment. It is helpful to hear the views of someone who has been there.

      I have been to Cuba and seen first hand how poorly their version of Socialism/Communism does. What is the point of going to work, or being a supervisor, if a person gets paid the same, regardless of what they do? I didn’t know how far Venezuela had gone in this direction.

      I have talked about the laws of physics dividing up what is available, varying from very equally (as in the hunter-gatherer society) to very unequally (as in capitalism, when energy supplies are becoming too high-cost to produce).

      The laws of physics also demand that the self-organizing economy “dissipate” as much energy as possible–provide as many jobs for people as possible, for example, and give people things that they desire, including homes, families, and vehicles. If citizens see other people with nice things, they want to have them as well.

      When a large amount of a resource, such as crude oil, becomes available to a country that has previously been poor, there can be a tendency of leaders to be overly generous. If we think about the situation, this is (at least theoretically) helpful both to the citizens who are able to have many goods that they could not have had previously, and to the workers who are able to have jobs making some of these goods and services. And on top of this, leaders get to be popular with their citizens, if they can give them things that they could not previously afford. I think a lot of oil producing countries have followed this path. Economists encourage taking out debt to stimulate the economy. Of course, the IMF and other lenders encourage debt as well, because the lenders can skim profits off the top as interest payments.

      In fact, our whole economic system revolves around “growth” and “development.” What is the point of all of the research being done in colleges and universities, if no one can afford the new products they come up with? University professors tend to be overwhelmingly liberal. They, too, encourage growth and development and use of new products. So every economic consultant that a person talks to encourages more roads, schools, electricity generation, and other things that people want.

      Of course, because of diminishing returns and rising population, a country can quickly find that the new system that has been purchased by debt is unaffordable. In the case of Venezuela, the approach to dealing with this unaffordabilty was to cut back on new capital investment and on wages for those who should be higher paid (such as technical people and managers), in order to keep citizens from revolting. Equal incomes, if a person doesn’t understand what this does to motivation, look like they can sustain a bigger population on a smaller outlay. College professors and consultants are good at putting together “models” showing that whatever they recommend will work. They overlook the dependence of the system on a depleting resource base.

      Our self-organizing system is very good at bringing together popular views that seem believable, but are really nonsense. This too, helps push countries in the direction of making bad decisions. The belief that we can get along without fossil fuels is one of them. Another is the belief that electric cars are in some way “better” or more sustainable. The belief that less developed countries can become more developed, especially if they have a resource like oil that can be extracted, is another one. The only story we ever hear is that everything will get better and better; the economy can only grow. The models we read about (even the climate model) are based on the false everlasting growth assumption.

      • Xabier says:

        In Spain there is a category of public employee called ‘funcionario’: basically un-sackable whatever you do.

        Something of a hang-over from the paternalistic side of the Franco dictatorship, but just loved by politicians and above all the Left, as it delivers a secure voting base of public workers who can be bought off with privileges and pay rises that those in the private sector can’t dream of. Young graduates eagerly submit to a whole rigmarole of extra exams to get such coveted positions.

        When people get paid regardless of whether or not they work, the worst of them just don’t do much, and the whole system becomes infected by laziness. Particularly true of the teaching and university sectors, local government and a whole host of advisory boards and councils. Most of my family feed off this system – smart move.

        There is also the layer of directly-appointed public ‘workers’, at management level, in the gift of political parties. Again, no real need to accomplish anything while in the job.

        Lots of young people I know in Spain have been educated in the beliefs of the radical Left, which is that if something is a human right, ‘it should be free’.

        They are rubbing their hands at the thought of the collapse of Capitalism, as the wonderful day when everything will be free is dawning. After all, wealth is there and just needs to be redistributed……..

        • Yorchichan says:

          When I first joined the (UK) civil service, I couldn’t understand why I was first in every morning and last out every night. Whenever I asked why this was, the answer my colleagues gave me was “flexitime”. It took me a while to work out I was the only one doing my full contracted hours. Some were present as little as core hours i.e. 20 hours out of their contracted 37 hours.

          My second civil service position was even worse. Where I worked there was a subsidised canteen (we’d all go eat a long breakfast mid-morning and a long lunch at lunchtime), a gymnasium (we could go work out anytime during the day), a library (we could read books/magazines or surf the internet all day) and a cheap bar that opened at 5pm. My job was maintaining a qualifications database and producing some tables. I received data once a quarter and could easily have the tables published within a week, leaving me little to do for the next twelve weeks except write computer games for my own amusement.

          Can’t believe I ever left! (It was many decades ago, so perhaps things have changed now.)

          Civil service joke:
          Q: Why don’t civil servants look out of the window on a morning?
          A: Because then they’d having nothing to do in the afternoon.

          • That comment also offers the ultimate argument against UBI too

            • Yorchichan says:

              Agreed. Work was at an individual’s discretion and many opted to do the bare minimum.

            • Yes Norman, and the Finns have given up on their pilot experiment because it didn’t produce the expected results., and I am not surprised.

            • it never could have succeeded

              yet i feel like the eternal pessimist for pointing it out, as I did when it first kicked off, giving my detailed reasons

            • Artleads says:

              Size is the element that keeps being ignored. Is this on account of normalcy bias? It’s impossible to imagine a decentralized system, since we’ve never seen one. But it’s surely more costly to run a centralized system than the alternative. These days, nothing much works in a centralized system. Whether UBIs would have a better chance in smaller increments of governance is hard to say, if we don’t even think in those terms. Small groups write grants and must report on how effectively they use the money. That would be one consideration anyhow.

            • Yes indeed and our small group have been canvassing for change here in UK for some years now – to no effect I might add.: http://harrogateagenda.org.uk/

              I am afraid that only a massive crisis will invoke the magnitude of change required for smaller government, locally based economies and sound money.

            • Artleads says:

              Peter Underwood

              http://harrogateagenda.org.uk/

              I use a different process, but it might arrive in a similar place over time. I tend to be incremental, feeling my way as I go. And what matters most is not people or democracy (although it may be, in a counter intuitive sense) but the land. Land must come before people. I’d also like to see some consideration of the British Commonwealth in a British-related vision..

            • Thanks Artleads and your observations are noted, I will pass them on to the group.and hopefully get back to you as only they can comment

            • @Artleads
              I promised to come back with info from the Harrogate Agenda group in response to your questions.. They are people of few words and rapid action – and say: –“ THA has six demands to improve our governance based on returning sovereignty to the people and using many of the principles of Direct Democracy which will make our politicians our servants instead of our masters.”

              We don’t think marching achieves anything but that lobbying key people in power and spreading the information by successful argument and interactions with others on social media etc is the way to promote change.

            • Artleads says:

              Peter Underwood,

              This seems to be the moment for your group. Assuming that the UK costs the center more to maintain than it can afford, the question would be less about democracy than how to hold British civilization together in some unprecedentedly low-energy form. Mind over matter. Form over content.

              Form for me exists already in how the empire organized itself: villages, towns, parishes, cities. boroughs… With the oil economy, did these units of government get compromised? If so, can they be restored? People respond to teams. “Our team/neighborhood/town/etc. is the best!”

              With the energy crisis Brexit, how can these old forms be used to create order within a decentralized British realm? Can Ireland FEEL unified while also keeping within the Kingdom? Can Scotland and Wales restore a taste of their old independence while staying within the union? Can the UK find INFORMAL ways to FEEL like it’s still part of a (more decentralized) new EU?

              Anyway, please indulge all this speculation. Thanks for responding!

            • Many thanks Artleads for your kind and supportive observations & questions and I am delighted to give you my own ideas. I have sent your last comments to the group for comment and I will send this one too and get back to you. You ask some very pertinent questions.

              Yes, we do think our group is gaining relevance but we have a long way to go against the entrenched elite who have total control over the UK centralised state. The City of London is the ‘Deep State’ here in UK and is totally independent of government. This is along video but it will explain a lot about this:

              Britain was and is organised as you say but the real power is held centrally as they control all the budgets and political decision making. Regional and local governments have no power to raise funding or taxes unlike the American state system. All funds are allocated from the centre. Britain is one of the most secret states of all, all key decisions are made behind closed doors and in secret chambers established many centries ago.

              You are right to suggest that centralisation is not feasible in the New Emergent Economy following the coming crash and energy crisis. TPTB will be forced to decentralise in order to hold the country together but not before riots and rationing are enforced because the elites will fight tooth and nail to hold on to their power base – but in the end they will lose.

              UK has plans in place for regional controls in the event of a nuclear war designed during the cold war era and they have stockpiles of supplies and organisation already. It is likely that this plan will be implemented as dsiorder becomes unmanageable. UK has an advantage here because of our relatively recent experiences of survival during WW2 when we stood alone.

              Brexit is a spoof IMHO. The elite will never let UK leave the EU, too much graft and money at stake. All this political noise will only result in an extended Art 50 period of up to 2 years, a general election and a 2nd referendum to keep us in the EU. When the crisis comes the EU will be one of the first to fail so I don’t see it impacting UK. N.Ireland will be just another region to administer. I don’t think the Union of N.Ireland, Scotland and Wales will survive; each area/region will become almost autonomous in their daily activities. Defence & Police might remain centralised but this is far from being a given.

              We live in interesting times. I always thought that I would be long gone before the collapse arrives but my wife (who believes in the bible) says I am going to be around as surely as her God has dictated! Oh dear, I am 75 this year, so according to the prophesies we are close to the end times! I don’t put much store on 2000 year old scribbling but others do.

            • Artleads says:

              “I always thought that I would be long gone before the collapse arrives but my wife (who believes in the bible) says I am going to be around as surely as her God has dictated! ”

              This produced more genuine mirth than I’ve experienced for some time. I still can’t stop laughing. I’ll side with your wife on this one.

              Your Brexit scenario sounds very plausible, but barring an enormous popular effort, I suspect that the crash we envisage would be too costly to endure (in such a networked society). I think the times do call for a new religion–one that is somewhat amenable to secular tastes–to head off the worst aspects of a crash. Not a moment to waste.

              Religions are likely to mushroom anyway, but without intellectual guidance and rigor, I’d expect the most alarming, batsh—t crazy ones to dominate.

          • Phew, that’s some confession. I’ve been in business all my life and thoroughly enjoyed it, being able to create things and feel the excitement of ‘winning’ orders etc. I can’t think of any other way to spend my time and putting myself in your shoes fills me with horror – I would be bored out of my mind in short order.

            But many thanks for sharing it anyway. However you were talking of long ago, it can’t be like this now, surely?

            • Yorchichan says:

              I suspect things have changed for the better, what with our top civil servants (aka Members of Parliament) setting such a good example ‘n’ all.

              My next employer eventually went full on Office Space, with micro-management, endless meetings and every minute of the day having to be accounted for. That was a ten times worse working environment and stifled productivity.

            • Oh, Yes I too have experienced that of which you speak. A very distessing experience and one I removed myself from very quickly!

          • Xabier says:

            Almost Soviet, Yorchican, (without the shootings, camps and compulsory lessons in political awareness).

            Did people still moan about being underpaid? 🙂

            Self-employed, I actually get up and work at sunrise because I love it (also like the afternoon siesta).

        • Sheila chambers says:

          Obviously we can’t have a system that pays the same wage to everyone, those who’s skills are of greater value to the system must be paid more than let’s say, a dishwasher. Another problem is those who need help also must stop producing more mouths that need feeding or the $$ will stop flowing.
          Nothing is “free”, free healthcare has to be paid for by someone, usually the taxpayer but there must be limits on the kind of care that will be provided, no boob jobs for you pauper.

          How can companies expect to have “consumers” of it’s products & services if the “consumer” is out of work & homeless? ‘Bots are not “consumers” of goods & services.
          Will the machines who now produce most of our goods also BUY some of the products they produce? Don’t hold your breath!

          Our current business model is totally unsustainable, you can’t have 5% of the population stealing most of the produced wealth leaving the remaining workers with too little to live on.
          Like Gail, I also noticed that the end is coming for fracked oil, it’s stock prices are falling, investors are not investing as much & banks are reluctant to loan it more $$ for companies that aren’t profitable & will likely never be profitable.
          Without more investment, fracking will come to an stuttering end.
          So what will the US do when it no longer has enough light fracked oil to blend with heavy oil from Venenzualia & elsewhere & it’s fracked oil production drops off the Seneca cliff?
          Where or who will be the US’s next target?
          Would it dare to go after Saudi Arabia’s oil?
          Stay tuned.

    • Lastcall says:

      ‘….because Venezuela’s collapse is causing problems for neighbors in the region like Colombia, who are US allies, …..’ hmmm

      ‘For well over a generation Colombia has seen political corruption in government and mass murder undertaken by its army and by pro-government “death squads” – violence on a far greater scale than is recently purported to exist in Venezuela. There were, however, no US calls for the overthrow of successive Colombian governments. On the contrary, the US supported the Colombians with armaments, finance and goodwill.’

      https://www.theguardian.com/world/2019/feb/25/us-hypocrisy-on-venezuela-sanctions

    • MG says:

      “government building and handing out fully furnished 2 and 3 bedroom homes for the favela-dwellers, for free, by the tens of thousands. Within a couple of years these neighborhoods already started to look like the favelas the residents had previously inhabited” – I know this from Slovakia regarding the Roma people. The problem is that when you have some limits, those people living on the limits, will not become rich when you move them to better houses: their income is so low that they can not sustain the living in better houses.

      “The difference in Venezuela is that the incompetence of the gov’t made it hit the wall right now in a catastrophic manner, rather than 30, 40 or 50 years in the future in a managed manner.”

      “Think about that for a second – in 50 years, just 2 generations, they multiplied themselves 5 fold!”

      It is not the things that matters, it is the energy that can be distributed. In that way Gail is totally right: its not about government incompetence, but about the needs of the growing population vis-a-vis the ENERGY THAT IS HERE AND NOW at the disposal.

      • MG says:

        I should have written “bigger houses”, because that is the crucial difference: the energy poor people can not afford bigger houses, as living in bigger houses is more energy demanding.

        Moreover, when you cover an area with houses, you need the corresponding energy, food etc. inputs to sustain the existence of such “island inhabited by human species”. If your country can not sustain such “island”, then you have to import those required items from other countries.

        We should think about the urbanized areas or areas with human dwellings in such a way – as islands that need to be fed with the inputs from the surrounding areas and, at the same time, provide some inputs for other islands and areas – be it resources or pollution. That way the favelas provide more pollution than resources.

      • Xabier says:

        It’s hard to think of a rich trading (and industrialising) country more corrupt than 18th century England, the figures are staggering: but energy flows from a global empire were ever-growing, so the corruption and mis-direction did no real harm to the whole.

      • DJ says:

        I saw that documentary- Paradise.

    • aaa says:

      Blah blah blah. You sound like a partisan with a partisan wife.
      Venezuela has had garbage support from the rest of the world. Most countries that aren’t tier-1 military powers are suffering similar circumstances, but minus the asymetric warfare.
      If USA would act more like Russia and China have behaved in their hemispheres, Venezuela would probably have a much better go at things, Maduro or whomever.

    • Richard Benton says:

      All lies how do we know you are not a cia mole using a mix of truth and disinformation Trust but verify Example:I am a Martian citizen of the Northern province of ///()wxybn I have been farming Martian ungulates As has my family for approximately 10000 years ever since the great volcanic eruption of the sandurian epoch Our government recently……as infinity To great the great Ronald Raygun-“Trust But verify”Sir can provide with concrete verifiable evidence that anything you wrote is true-birth certificate witnesses where you went to school pay stubs work evaluation photos videos-Anything?no Extraordinary claims with no evidence can be dismissed with no evidence In this climate of full on economic warfare by the Chump admin don’t believe ANYTHING u read anywhere

      • Tim Groves says:

        Don’t believe none of what you read and half of what you read unless it confirms your current prejudices and worldview, certainly.

        But what’s all this about extraordinary claims? I never agreed with Carl Sagan that they require more extraordinary evidence than common or garden ordinary claims do. Logic dictates, according to Mr. Spock, that all claims should require the same standard of evidence, and that applies whether you’re claiming you spent the evening touring the local bars or touring Mars.

        • Jan Steinman says:

          Logic dictates, according to Mr. Spock, that all claims should require the same standard of evidence

          So, you would require the “same standard of evidence” for a death-penalty crime as for a traffic ticket? The law disagrees with you.

          There’s something called the “precautionary principle,” which demands that when the result of making a wrong decision would be catastrophic, a lower, “precautionary” level of evidence is warranted.

  5. Duncan Idaho says:

    Drumpf just declared GOLAN as Zionist sovereign turf.
    This is getting interesting, having someone with this lack of competency running the show—

    • Many of his previous real estate and other deals have been co(n)-invested from this very angle. Not mentioning the current family-clan status of his son-in law..

      So, this is sadly not about lack of competency, this inner club is simply in charge since at least late 17th century globally. Now, they are facing interesting times for a change, they can’t move in person into China or India, and are to large extent blocked from orthodox Russia at least for current and upcoming next generation of policy makers there. And that’s shaping up while their assumed “home turf” West burns down, chiefly thanks to their successful prior subversion. They are increasingly desperate and pushed into corner, it’s about time.. Anyway it would be likely only temporary setback though as being the longest un-interrupted urban concentric civilization for say past ~4-5k yrs gives them huge leverage vs any other competing tribe, culture, ethnicity or what have you.

      • djerek says:

        On the other hand, if this collapse wipes out all urban civilization for a few centuries (or even millennia) they’re not exactly set up to succeed.

        • yep, exactly, that’s implied in my post, however not sure if and when that’s going to happen though..

          • Artleads says:

            Can “we” make a deal with them though? They take their foot off our necks and we cut them in to some perks? They get to keep much, most or all of their stolen land (that they can manage without harm), but don’t try to acquire more. They allow us to carve out enough of our own territory to enable us to step the civilization down in an organized manner…

  6. qearhyjgedyk says:

    Oh Gail. How is it you continue to provide the best commentary that can be found! Just a few little comments. Libya going off line during its regime change didnt effect world markets in oil one bit. Things that make you go hmmm. And the debt of the USA government. How does it apply in comparison to venuzuela? It doesnt. Venuzuela didnt have the military power of the USA. Is that in doubt? Ask Saddam or Qaddafi.

    • Duncan Idaho says:

      Maduro is still there—-
      Let me know when this changes.

      • Richard Benton says:

        It will He’s a mortal as is Guido Pinocchio All things must pass This whole world system is an absolute verification of the Absurdist School of philosophy We really can’t do better than this?Youve got to be kidding me man The dude abides

  7. Duncan Idaho says:

    Countries With The Most Protected Lands (Percentage Of Area As Reserves)

    https://www.worldatlas.com/articles/countries-with-highest-percentage-of-protected-reserve-lands.html

    • Artleads says:

      Thanks. Great info! Venezuela almost at the top! And no children or homeless people littering the streets. They must be doing SOMETHING right!

      • Duncan Idaho says:

        Anyone relying on MSM for information on Venezuela is delusional.
        They have been wrong all along.
        I use friends returning from the country.

    • Protected lands are often lands with little commercial value. I think that that is part of Venezuela’s problem. A lot of its land is not very useful, for anything other than forest. Forest fires are part of the natural cycle within these forests. (The same is true in California.)

      If a country wants to string electricity transmission lines through these areas, it must be awfully careful, because it requires a huge amount of effort (and energy costs) to keep fires in the regrowth from damaging the lines. This is in addition to the risk that sparks from the transmission lines could cause fires. While it looks like these areas could be developed, this is only the case with huge inputs of energy.

      • Duncan Idaho says:

        Gail—
        You really need to look at that closer.
        Different eco systems.

        • Richard says:

          Well said Every sugared centimeter of Earth is sacred-or none of it is -To include the space between Maduros ears

          • Richard Benton says:

            every square centimeter can anybody tell how to disable spell$&&@&&@“”!!check?

  8. Jan Steinman says:

    Venezuela is the only oil exporting country that has used debt as extensively as it has.

    It appears that the US “fracking revolution” has been almost entirely structured by debt, as well.

    How do these two compare? I know the US probably has more profit-making conventional oil, but the much-touted “second peak” appears to be like a strapless evening gown — no visible means of support!

    • Duncan Idaho says:

      I know the US probably has more profit-making conventional oil

      Actually, Venezuela has more conventional oil.
      Much more—–

  9. Jan says:

    In their december World Energy Outlook 2018 IEA warns against supply crunches starting 2020-2025 and recommends large investments. As it seems US fracking is not able to collect enough money now. I wonder if investments into Venezuela could do the trick and how long. OPEC reduces quantity to raise prices and make investments more profitable. Where will the money for higher prices come from? Obviously they will squeeze some people out to keep the system running. To exclude people from minimal living conditions is no solution? Economy is for people and not vice versa. I am not convinced that the braindrain causesd inefficient solutons, watch the Brexit process! The more close we come to the end of cheap oil the more socialist societies will be to keep people calm and maintain the right to property. For me the only option seems regional self supply with sustainable techniques, including building up soil and keeping in mind clima change. There are a lot of obstacles to do so, though, so we never reach a sufficient level. For those into econometrics the following study from 2014 might be interesting, they clarify some historical deficits in measuring the role of energy for creating wealth: https://iopscience.iop.org/article/10.1088/1367-2630/16/12/125008/pdf

  10. Harry McGibbs says:

    “South Korean exports, seen as a bellwether for global trade, fell nearly 5%in the first 20 days of March…

    “Exports to China and Japan fell by more than 10%. Shipments of microchips, oil products, and telecoms devices were all down.

    “These data bode ill for [the first quarter],” said Freya Beamish, chief Asia economist at Pantheon Macroeconomics. She says the decline suggests an annualized plunge of 27.6% for the full month, a far sharper contraction than the 9.7% fall in the fourth quarter of 2018.

    “The nation’s 20-day exports shrunk 11.7% in February, and there could be worse to come. “Leading indicators suggest the floor is not yet in sight,” Beamish said.

    “South Korea’s export data is one of the first major economic indicators released each month… The latest downswing will fan fears of slowing growth in China and recession in Japan.”

    https://www.sfgate.com/technology/businessinsider/article/A-data-point-seen-as-the-bellweather-for-global-13706055.php

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